State governments stand to save billions of dollars in Medicaid prescription drug costs thanks to a new rule based on an Alabama cost-saving innovation. Instead of paying for drugs according to drug company price lists, which are often inflated, Alabama Medicaid got federal permission a few years ago to start reimbursing local pharmacies on the basis of what they actually pay for the medications.

The change cut Alabama's Medicaid pharmacy bill by $30 million in the first year. Now, the federal government will allow all states to use the Alabama payment method.